Monday, September 28, 2015

Insights on Amazon's Strategy To Enter the FMCG Market In France

This is one of the hypest topic in the professional retail newspapers in France: Amazon has launched last week a new platform to sell FMCG products. We all know that selling FMCG products is one of the key strategy of Amazon in the next few years. According to Amazon, it will enable the E merchant to grow its sales in term of frequency, providing a better customer experience. Moreover, the FMCG market is a large pie, where even a small share could represents soon billions in sales worldwide. Amazon has already launched services in several cities in the US with its Amazon Fresh service.

Now in France, it is not exactly the same concept, as Amazon is focusing on dry products, rather than fruits, veggies and dairy products. It is therefore easier in terms of logistics and supply chain to deal with.

This is also the reason why Amazon is using some of its partners in its marketplace to complete the offer. Here is a sum up of the different info you may find in the French news.

The issue is that by doing so, Amazon don't master neither the availability of the product nor the pricing of it.

Problems with the pricing

Amazon is for sure not a FMCG retailer. Therefore, it sometimes have very bad pricing, as you can see above: a tuna can at 34 €, simply because the offer comes from a British market place. But for a French customer, the pricing of this item hurts very much the image of Amazon as a discounter.

The E Merchandizing

France is a great market for the Ebusiness of FMCG goods. Indeed, the concept of drive thru shopping is a tremendous success, counting for about 5% of the total sales. Therefore brick & mortar such as E. Leclerc or Auchan propose robust shopping experience online.

Amazon is using the Very same interface it uses for all its other categories. The problem is that you don't shop the same way for a TV or clothing than food. Your decision making process is faster, and the filter system part of Amazon's website is not accurate enough.

Same thing with navigation within a category. The category leaders are not present in the first page of the choice. But I am not so worried about this fact. Indeed, we all know Amazon is good at ranking its products. It may not have enough sales history to propose an accurate ranking so far.

Conclusion

Now, you can clearly see that Amazon is not ready yet to enter the competition. Furthermore, the task is hard. As I have said, Amazon enter the Emerchant competition delivering FMCG goods home. This is a 500 millions € market, whereas the drive thru business counts for over 5 billions €... It will be tough then to have a concrete market share without developing a large drive through network.

Nevertheless, Amazon has a great reach, and probably we will soon see the power of Amazon:

Amazon is a yield management freak. Once they will have enough sales data, it will close in the issues noticed on pricing, and product ranking. The only question remaining is: Shouldn't Amazon develop a specific interface for FMCG products? I believe they should. And when you see all the hype around their dash buttons and other ways to have monthly subscriptions, you can clearly see they will soon improve fast.